Don't Measure, Don't Manage: GDP and the Missing Economy of Nature

If "what gets measured, gets managed," then it's fair to say much of the world's environmental resources are not adequately managed. It is widely accepted that traditional economic accounts like GDP and similar measures simply do not account for many of nature’s products and services.

Some countries have attempted to tackle this problem through efforts to develop workable environmental accounting systems, but the United States has remained largely a bystander, says RFF Senior Fellow James Boyd.

In a new RFF Issue Brief, "Don't Measure, Don't Manage: GDP and the Missing Economy of Nature," Boyd makes the case for developing an accounting system to monitor the condition of what he terms the natural economy. As a first step, he says, "Congress should encourage, rather than discourage, the creation of environmental accounts." Congress's lack of support for environmental accounts dates back to mid-1990s, when it explicitly directed the Bureau of Economic Analysis to abandon explorations of the topic.

But establishing workable national environmental accounts requires more than lifting congressional roadblocks. Accounts are more than an ad hoc collection of indicators; developing them will require collecting data, explicitly weighting goods and services enjoyed, and aggregating the data according to well-defined accounting rules. This is not a trivial logistical or intellectual undertaking.

International efforts so far have had only modest successes, says Boyd, and while the United States should learn from them, it would be a mistake to mimic them. Moreover, the goal of a "Green GDP" is likely to prove elusive, at least in the short term.A more prudent strategy is to pursue a satellite national environmental accounting system that could perhaps one day be integrated with GDP itself.

And while it might seem that the U.S. Environmental Protection Agency would be the logical home for green accounting, Boyd says this would undermine the independence that is critical to the account’s long-run credibility.

Protecting the floodplain from development along the Meramec River in St. Louis County, Missouri, not only results in benefits from avoided flood damages, but also in increased property values for homes near protected areas.